Resistance Is Futile
"Travis? He's out by the pool." An Uber employee who smells like sunblock greets me as I enter the front door to the Miami beach bungalow the company is renting. She bounds upstairs as I meander toward the back of the house, poking my head into various rooms. There are signs of the dozen recent college grads stationed here: a bedding pile crumpled on a couch; a jumble of high heels in the foyer.
Three Cadillac Escalades are parked out front. Out back are parked four Uber employees and their MacBooks, on benches and chaises around the pool. It's T-minus two hours to the first Miami supersecret cocktail hour, a recruiting party for which planning began 48 hours earlier, and Travis Kalanick, the CEO of Uber, is calm.
He has been in meetings all morning, but now he's in a T-shirt and sandals, just catching up on email and joking around. He asks me if I'm familiar with the words jamazing and ledonk and treats me to the UrbanDictionary.com definitions of each--the latter of which he boasts of having coined.
When an employee whispers to Kalanick that an email promoting the party may have been sent out to the company's "all-Miami" list, the mood suddenly tenses.
"No, no, no, no, no," Kalanick says. "What part of 'this is not public' do you not understand?"
I excuse myself and duck back inside the house. Two lanky managers in Uber-logoed sleeveless T-shirts are hunched over the dining-room table, where they are instructing two brawny older men in black suits.
Uber is the extremely fast-growing company behind an app that lets city dwellers hail taxis, sedans, and SUVs--like the ones parked out front. The company, which was co-founded by Kalanick just four years ago, is doubling its revenue every four months, has hired 225 people in the past year, and now operates in 35 cities.
This group of Uber employees flew into Miami for 10 days in part for a work retreat, and in part to act as a kind of advance squad, whose duties include networking with hospitality workers, scouting venues, and recruiting Miami Uber drivers.
Keith Radford, who in a normal week is the general manager for Uber's operations in Atlanta, is explaining to a potential driver that touching a button on the driver's iPhone labeled Arriving Now will alert his passenger, who has hailed him through the Uber app on her phone. Three minutes later, if the passenger hasn't hopped in, the driver should phone her. After 17 more minutes, he's to call again if she hasn't shown--and then cancel the ride.
"Wow," says the driver, Baldwin Clarke, a longtime private driver in Miami and owner of one of the shiny vehicles out front. "Sometimes, I sit for hours. One time, I sat for 15 hours, no kidding. You guys don't mess around."
Radford, Kalanick, and I climb into the Escalade of another potential driver and head toward downtown for the party. "If we were operating, this could be considered the first Uber ride in Miami history," Kalanick says, squinting out over the Atlantic Ocean.
That's if Uber were operating in Miami. But we are just taking a test drive on this January night, and all the drivers shuttling passengers to the Uber party this evening are being paid hourly by Uber to try out the app. Using it to find fares, and accepting payment for a ride through it, would be illegal. Kalanick is here to change that.
In most major U.S. cities, and many around the world, there's an alternative to standing on a street corner flailing an arm for a taxi. Typically, this is phoning a local car service--or, within the past couple of years, opening an app on your phone. Open the Uber app, which was the first car-service app available in most U.S. cities, and you'll see a map of your location, replete with nearby vehicles for hire and their estimated times of arrival.
One can usually reach you in five minutes, and the ride will carry a minimum cost of about $7. But you can't do this in South Florida. Regulations in Miami-Dade County dictate that a car-service or limo ride must be booked at least 60 minutes before the ride begins and cost at least $80. Unless the Miami-Dade County Commission changes the law, Uber is locked out of a multihundred-million-dollar market.
As it expands, Uber often meets legal complications--cease-and-desist orders, court injunctions, the impounding of cars. Uber is no stranger to complaints from public utilities commissions, from city councils, and from taxi and limousine commissions, all of which have constituents clamoring for protection from the likes of Uber.
It used to be if a scrappy company tried to take on a local government, it might not have the heft to win. Uber, with $50 million in venture capital backing and a growth rate that rivals those of Google and Amazon in their early years, definitely has heft.
It also has an aggressive culture and growth strategy set by a CEO who is so headstrong, so enthusiastic, and so combative in defense of his big idea that he is at risk of seeming like a parody of today's tech entrepreneur--up to and including having a thing for Ayn Rand. You hear a lot about tech companies shaking up staid industries, pushing past slow, complacent competitors. This is the next phase. This is Silicon Valley's cult of disruption taking on city hall.
Recently, some of the world's fastest-growing tech companies have been pushing ahead with their ideas without pausing to ask for permission. As a result, they're behaving in ways lawmakers aren't quite comfortable with. Consider that on your phone, you can purchase luggage (say, on Amazon), find someone to carry said luggage (TaskRabbit), rent an apartment for a couple of days (Airbnb), and hail a luxury sedan (you get the picture). But when the luggage retailer doesn't pay state sales tax, the employment provider doesn't pay minimum wage, the renter doesn't hold the lease, and the sedan driver doesn't charge a fixed rate? The government is pissed.
Uber started operations in its hometown of San Francisco, then opened for business in four more cities before rolling into the nation's capital--its sixth city launch--in December 2011. Kalanick had assigned a launch team to explore potential regulatory hurdles in the district, and the team found what seemed to be clear skies.
Kalanick hired a Washington, D.C., manager named Rachel Holt, who followed a launch strategy that had proved successful in other cities and is still the basic model. She managed a team that recruited drivers, in part through cold calling car services and limo companies.
A separate team for community management started social-media outreach, and a post on Uber's blog announced that an Uber vehicle had been spotted in the district. Uber hosted a launch party for VIPs. The whole process took about six weeks, at the end of which Uber was fully operational.
All was going as planned in Washington. "Until I got a call at 6 a.m. from Rachel a month later," Kalanick says. The city's taxi commissioner, Ron Linton, had an Uber car impounded and its driver ticketed. He said Uber was violating regulations by charging fares based on time and distance--a privilege that, according to his reading of the regulations, was limited in D.C. to taxicabs. Uber was suddenly making national news. It did not, however, stop operating.
Then, last summer, councilwoman Mary Cheh proposed a transportation bill that included what were literally called Uber Amendments, one of which would have put a price floor under car-service rides, effectively making Uber five times as expensive as a taxi for short trips.
Uber came out swinging. It reached out to users asking for support. That drove 50,000 original emails and 37,000 tweets with the hash tag #UberDCLove. Cheh reversed, omitting the amendments Uber disliked. Then, she did more than that: She sponsored a nearly inverse piece of legislation that establishes a legal framework for "digital dispatch" in the district. It passed last winter.
These moves--the launch party, the hash tag--are straight from what everyone at Uber calls the playbook, a now-extensive collection of strategies for overcoming obstacles on the local level. After Uber launched in Chicago, the city's consumer protection board proposed regulations that would limit sedan drivers' use of metering devices--which in Uber's case is a smartphone. That would have essentially shut down Uber's black-car service there.
So the company launched a social-media campaign. "What we did in Chicago, what we do in all these cities, is reach out to all of our users and say, take action--email your councilperson; email the mayor," Kalanick says. "Uber riders are the most affluent, influential people in their cities. When we get to a critical mass, it becomes impossible to shut us down."
Denver is a more recent test of the playbook. In January, Colorado's Public Utilities Commission proposed rules under which the company could be classified as a motor carrier--meaning it would be treated like a taxi company. This issue is at the core of many of Uber's regulatory challenges. That's because, city by city and state by state, transportation companies of all sorts--cab, sedan, limo--are heavily regulated in terms of the insurance they carry, the structure of their fares, the background screening of their drivers, and the condition of their vehicles.
Uber neither owns vehicles nor employs drivers; it makes the technology that connects a user to a driver, one who is ostensibly already abiding by all these local regulations. As Kalanick often says, "They need to decide whether we are Orbitz or American Airlines."
To be classified as a transportation company would amputate from Uber the exact things that make it an exceptionally good business: its ability to scale fast, control how a rider pays, and not be bogged down by owning vehicles.
For a court hearing in March on the PUC's proposed rules, Kalanick flew to Colorado, where Uber's team on the ground had already launched an online campaign (#UberDenverLove). After the daylong hearing, Kalanick hosted a nighttime rally, with drinks, for supporters at a local start-up education space called Galvanize. Uber is still doing battle in Denver. The Federal Trade Commission has weighed in against the PUC's proposed rules. Add a rally of ardent fans to the playbook.
In its political struggles, Uber's most potent weapon is its ability to present itself as a force for modernization and freedom and against bureaucrats and politically connected interests--and in broad strokes, that is an accurate picture. But it's not a complete picture, because Uber's competitors are in many cases other entrepreneurial businesses.
One major Uber opposition force is the Taxicab, Limousine & Paratransit Association, a global trade group of more than 1,000 livery fleets and taxi companies. The group scoffs at Uber's assertion that it can't be regulated like a taxicab or limo company because it doesn't own any cars or directly employ any drivers. The TLPA isn't against ride-hailing apps in general--it endorses one called Taxi Magic--but it characterizes Uber's product and others as "rogue apps," and published a white paper by that name.
Central to the complaint is Uber's surge-pricing system, whereby the price for rides rises as demand increases. So a ride home on New Year's Eve might cost you five times as much as a ride home on December 30.
Mike Fogarty, the CEO of limousine company Tristar Worldwide Chauffeur Service, which runs fleets in New York City, Boston, London, and Hong Kong, says the playing field is uneven. "Uber portrays the industry operators as companies that are entrenched and in bed with local officials," he says. "We are small businesses. We don't have the money or the social-media clout that Uber does. We are the ones being bullied here."
Kalanick grew up in Los Angeles's Northridge neighborhood, learned to code in sixth grade, and continued on a technical track through college at UCLA until dropping out to work on his first company, called Scour. Scour was a sort of proto-Napster: a pioneer in file sharing. Media companies didn't exactly support that aim, and in 2000, Scour was sued for a quarter of a trillion dollars.
The company declared Chapter 11. Next, Kalanick worked for years on a new company, Red Swoosh. He didn't pay himself a regular salary, and he lived at home with his mother. His lead investor, Mark Cuban, lost interest and asked for his money back. Eventually, however, Kalanick sold that company for $19 million.
At 36, he still has a chip on his shoulder, and conversing with him is an entertaining--if challenging--exercise. Despite his sturdy self-confidence, he distrusts journalists and seems to be skeptical of strangers in general. He once told me by instant message that he had "1000 things more important to work on" than an interview with Inc.
He has developed a reputation for being aggressive, a tough negotiator, blunt, someone you really don't want to cross. In March, he got into a Twitter throwdown with John Zimmer, the co-founder of the ride-sharing service Lyft. Kalanick got the last word with, "you've got a lot of catching up to do...#clone."
When quiet negotiations with city officials don't seem to be getting him anywhere, he has a tendency to lash out, often by implying that the people standing in his way are corrupt. Lawmakers, understandably, have bristled. The Washington City Paper wrote: "To see the way some D.C. councilmembers treated Travis Kalanick at a hearing last month, you would have thought they had cornered a master criminal."
Employees one year ago: 75
Cities globally: 35
Cities a year ago: 12
Month-over-month revenue growth the past year: 18%
Kalanick does his part to bait his critics. He can be at times comically grandiose and un-self-aware. When I ask him why he left angel investing (which he was doing after selling Red Swoosh) to run Uber, his rambling, five-minute answer includes two hyperbolic claims, a mixed metaphor ("It's so complex all you can do is swim in uncertainty"), childish whimsy ("that is my happy place"), and, believe it or not, an unironic Braveheart reference.
"That's part of me, that freedom fighter in me," he says. "It's like Braveheart. Like, 'freeeeeduuuuuuuuum.' "
Kalanick has clearly devoted a lot of thought to his own mix of skills, which he refers to--often--variably as "creative pragmatism" and "pragmatic creativity."What that means in short is that he understands the back-end workings of the business well enough that he could rebuild them himself (well, almost), and he also cold calls customers and says things to journalists aimed to warm consumers' hearts, such as: "On Valentine's Day in Chicago, we had every driver give every woman who got in the car a rose. That is scaling romance." He's something of a technical co-founder and a biz-dev whiz rolled into one. In this sense, he's an investor's dream CEO.
"He can present a high-level pitch and do so in an entertaining fashion," says Alfred Lin, a partner at Sequoia Capital, who as an individual contributed to two of Uber's venture-funding rounds. "He can drill down to the crux of the problem and be very detail oriented, whether it's on the service side or on the math side."
Kalanick has hired in his image. He looks for general managers who can think both analytically and creatively--creative pragmatists. A city's GM oversees two branches of employees in that city, the driver-operations side (very adept at math, technical, left-brained; Uber is full of former investment bankers) and the community-management side (creative, social-media savvy, right-brained).
When hiring--or just in meeting new people--Kalanick automatically sizes up an individual's skills and temperament. If he likes the person, he starts placing him or her in one of two buckets: d-ops or CM. I stopped by a dinner the Uber team held at Prime One Twelve, an expensive South Beach restaurant, and the waiter had the charisma and smile of a talk-show host. He was eloquent and game for jokes. Kalanick whispered, "Definite community-manager material" before introducing himself to the waiter, who said his name was Kevin Baynes. "Kevin," Kalanick said, "have you ever worked at a technology company?"
The playbook has worked all over the country, but in Miami, most of the plays have yet to be called, and the fact that Uber Miami has been a year in the making is a significant frustration. Radford, the GM for Atlanta, flew in to investigate Miami laws last summer, and when he reported back, Kalanick found them too tough to work around.
A year later, Kalanick has met with Miami officials a couple of times, including in January, when Uber threw that more-secret-than-usual prelaunch recruitment party. He is hopeful a bill will be introduced soon that allows Uber to operate. "Everything I've gotten from any political leader there is very positive," he says.
Meanwhile, the company is venturing beyond cars. It launched a motorcycle-pickup service in Paris, a mariachi-band delivery service in San Francisco, and an ice-cream-truck-delivery service in seven cities. Yes, dessert trucks are cute, if complicated, publicity stunts. They can also be considered grand experiments in the future of Uber.
The idea: Uber doesn't just set passengers up with drivers. It's a company starting to dream of becoming a logistical nervous system for cities.
If you ask Kalanick about competitors--of which there are many, especially in the taxi-hailing space--he is dismissive: They're just clones; they aren't worth talking about. But once, I asked about Square and whether Uber might function most profitably as something of a payments company. He lit up. He said he could see applying the Uber model--taking a 10 percent to 20 percent cut of a customer's payment while providing superior service--to anything.
Is it much of a stretch that Uber, which is on its way to becoming a verb, could soon mean "ordering food delivery" or "hiring a cleaning service"? It's already standing for "reserving private planes": Garrett Camp, who co-founded Uber with Kalanick (though he doesn't have an operational role), last year launched BlackJet, an air-travel business modeled on Uber's technology.
Kalanick's closest mentor, with whom he's on the phone or side by side nearly daily, is Shervin Pishevar, formerly a managing director at Menlo Ventures, an investor in Uber. Pishevar says he believed so much that the company's original model could scale globally that he helped enlist other investors, and a few celebrities, including Olivia Munn and Ashton Kutcher, to his round.
That's because he likes Kalanick's reflexes, even when--as in Washington--they push him to fight. "His instincts are singular and unique," Pishevar says. "He's changed how city politics work." Now that cities have changed their laws to accommodate this Silicon Valley approach to transportation, other logistics industries might want to brace themselves.
"Uber is building a digital mesh--a grid that goes over the cities," Pishevar says. "Once you have that grid running, in everyone's pockets, there is a lot of potential for what you can build as a platform. Uber is in the empire-building phase."
PRINT THIS ARTICLE